Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
Please note that all times are shown in the time zone of the conference. The current conference time is: 16th June 2024, 03:35:49pm EDT
Session Chair: Constantine Yannelis, University of Chicago Discussant: Deniz Aydın, Washington University in St. Louis
Location:Room 1212
Presentations
Credit Card Borrowing in Heterogeneous-Agent Models: Reconciling Theory and Data
Sean Chanwook Lee1, Peter Maxted2
1Harvard University; 2UC Berkeley
Constrained, “hand-to-mouth,” households with zero liquid wealth are a central building block of modern heterogeneous-agent consumption models. We document empirically that many of these seemingly borrowing-constrained households actually revolve intermediate levels of high-interest credit card debt, meaning that they are not constrained at either the zero-liquid-wealth kink nor at their credit card borrowing limit. This finding presents a challenge: how can heterogeneous-agent models generate empirically realistic marginal propensities to consume without relying on borrowing-constrained households? We show that present bias induces households to revolve modest levels of credit card debt, but their indebted saving behavior still generates elevated MPCs. We then apply this insight to highlight key channels through which credit card borrowing reshapes households’ responses to fiscal and monetary policy.